5 Criminal Sanctions for Spoliation

• Library: Spoliation of Evidence: Sanctions & Remedies for Destruction of Evidence in Civil Litigation (ABA) (2013 Ed.)

Premised on the notion that nothing concentrates the mind like the prospect of a hanging, Sarbanes-Oxley added strong penalties for corporate wrongdoing . . . .¹

Federal and state laws providing for criminal penalties for the destruction of evidence have long existed.² Notwithstanding changes to the legal landscape that resulted from the Enron and Arthur Andersen debacles, "the proposition that destroying documents may have criminal consequences is nothing new."³ Among the federal statutes that were applicable to the destruction of evidence before Congress enacted the Sarbanes-Oxley Act of 2002⁴ are the following:

• 18 U.S.C. § 1503, which prohibits obstruction of justice;⁵
• 18 U.S.C. § 1505, which governs obstruction of proceedings before departments, agencies and committees;⁶
• 18 U.S.C. § 1512, which governs witness tampering;⁷ and
• 18 U.S.C. § 2071, which criminalizes willful destruction of records filed or deposited with federal courts or public offices, or by one having custody of such records.

In the wake of numerous accounting and corporate fraud scandals, the collapse of Enron and Worldcom, and a falling stock market, Congress passed the Sarbanes-Oxley Act of 2002 (the Act).⁸ The Act made civil, criminal, and administrative reforms that altered practices in corporate governance and in the securities and accounting indus-tries.⁹ In the Act, Congress created new criminal laws and penalties and amended existing federal statutes and penalties criminalizing the destruction of evidence.

For example, Section 802 of the Act created a new offense, codified at 18 U.S.C. § 1519, which provides:

Whoever knowingly alters, destroys, mutilates, conceals [or] alters . . . any record, document, or tangible thing with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined . . ., imprisoned not more than 20 years, or both.¹⁰

The amended provisions regarding document destruction in 18 U.S.C. Sections 1512(b), 1519, and 1520 "cast a wider net, reaching persons who shred documents even where a proceeding or investigation does not yet exist."¹¹

The Act also amends an existing obstruction of justice offense, 18 U.S.C. Section 1512(c), by adding a provision punishing alteration, destruction, mutilation, or concealment of records. Unlike 18 U.S.C. Section 1519, this amendment only applies to official proceedings and not to acts taken in "contemplation" of such proceedings.¹²

Section 802 also creates a new criminal offense, 18 U.S.C. Section 1520(a)(1), which requires accountants to "retain corporate 'audit or review work papers for a period of 5 years . . .'" and makes it a crime to "knowingly and willfully violate Section 1520(a)(2) or any rules or regulations promulgated by the Securities and Exchange Commission under Section 1520(a)(2) relating to the retention of relevant records."¹³

As one commentator noted, many of the criminal provisions in the Act "duplicate the conduct and intent terms of existing provisions" of the federal criminal code.¹⁴ For instance, Section 802(a), an obstruction of justice offense codified at 18 U.S.C. § 1519, is nearly identical to 18 U.S.C. Section 1505, which prohibits obstruction in any "pending proceeding."¹⁵ Both acts appear to have the same requisite intent. Section 802(a), 18 U.S.C. Section 1519, requires intent to impede, obstruct, or influence, while the intent required in 18 U.S.C. Section 1505 is for "the purpose of obstructing justice."¹⁶

The relatively new obstruction statute also appears to make unlawful only "slightly more types of conduct" than 18 U.S.C. Section 1505.¹⁷ Although Section 802(a) extends to acts taken in "contemplation of federal investigations, the courts have already defined 'pending proceedings' quite broadly under [18 U.S.C. §] 1505."¹⁸

Likewise, while 18 U.S.C. Section 1520 appears to be a "novel offense targeting accountants," it is likely that the proscribed conduct also will fall under pre-Sarbanes-Oxley obstruction of justice statutes.¹⁹ And, given their limited resources, it seems unlikely that prosecutors will use such resources to pursue "negligent or sloppy recordkeeping" absent other criminal conduct that also will fall under preexisting obstruction of justice laws.²⁰ Therefore, 18 U.S.C. Section 1520(b) is more likely to serve as an additional penalty for obstruction of justice by accountants, rather than a new federal crime.²¹

In addition to federal criminal laws, a number of states' laws provide criminal sanctions for tampering with or destroying evidence to obstruct justice.²² However, there is considerable variation from state to state in the scope of criminal statutes that reach destruction of evidence. A substantial majority of states have statutes that specifically prohibit destruction of evidence, while a minority of states have statutes that prohibit tampering with or destroying evidence generally (that is, an obstruction of justice statute) or do not have any clearly applicable statutes.²³

Criminal sanctions have been imposed for destruction of evidence in the context of criminal proceedings, such as grand jury proceed-ings.²⁴ Although criminal sanctions are theoretically available for destruction or concealment of documents during civil litigation, "there are no reported criminal convictions for evidence destruction in civil litigation."²⁵

One reason for the unavailability of criminal sanctions in civil litigation is that criminal sanctions "cannot restore the accuracy of the original fact finding proceeding, nor do they compensate the victim of evidence destruction for its loss in the civil suit."²⁶ Moreover, "[s]carce prosecutorial resources simply do not permit prosecution of spoliation in private lawsuits."²⁷ In addition, many state statutes that provide for criminal penalties for spoliation are inapplicable to civil proceedings.²⁸

More than one court has recognized that criminal penalties may be applied for spoliation of evidence that occurs during civil litiga-tion.²⁹ For instance, in United States v. Lundwall,³⁰ the U.S. District Court in New York refused to dismiss an indictment against two former officials of an oil company. The indictment charged conspiracy to obstruct justice by destroying documents relevant to a class-action lawsuit against an oil company. The former officials moved to dismiss the case, arguing the obstruction of justice statute, 18 U.S.C. Section 1503, had never been used against individuals for destruction or concealment of documents during civil litigation.³¹ The court denied the motion, reasoning, "[n]othing in the legislative history [of the statute] demonstrates that its broad language was not intended to cover allegedly 'corrupt' conduct in civil litigation that impedes the due administration of justice."³²

The court observed that good reasons exist for prosecutors' reluctance to bring criminal charges relating to conduct occurring...